@morelikewater, yet another tedious #ukuncut resident, expects us to be outraged by this story:

While nearly one-in-ten Americans are out of a job and the country attempts to rebound from recession, some of the richest companies in the US are compensating their CEOs famously in lieu of stimulating the economy.

A report released today from the Institute for Policy Studies (IPS) reveals that a quarter of the highest-paid CEOs in America actually made more in 2010 than their companies paid in federal income tax. In some cases, reveals Washington DC-based IPS, those same companies even spent more on lobbying than they did on taxes, putting more money into furthering their personal causes than giving back to the crumbling infrastructure that kept them afloat during the troubling times as of late.

Well, we are outraged, indeed. We're blooming furious that such a stupid story could ever get written. And for that, we have to thank the Institute for Policy Studies, which even the fair-minded Wikipedia refers to as being considered 'far left wing'.

Firstly, while the article is headed up 'Corporations spend more on CEOs than on taxes', it immediately makes it clear that we're talking about only one quarter of the highest-paid CEOs in America. So instantly we can deduce that 75% of companies paid more tax in 2010 than they paid their CEO. Still angry?

In the report from IPS released Wednesday, August 31, that of the 100 highest-paid CEOs in America, 25 of them make more than their companies contributed in tax payments last year. IPS has unearthed that around two-thirds of the firms mentioned in the report used offshore subsidiaries in international tax havens to get the biggest breaks. Elsewhere, the other one-third of the top 100 benefited from accelerated depreciation.

It may have escaped IPS's notice that, um, we're in a fairly uncertain and rocky economic climate. And lots of companies have reported in the prior tax year horrendous operating losses. Governments are very quick to tax profits but aren't quite so generous when it comes to relieving losses. So you tend not to get a refund straight away, but must wait until future periods to get the relief. That's what's happened here. Lots of companies made losses, which have been relieved during the 2010 tax year.

At the same time, because they still wanted to enjoy the services of their CEO they had to keep paying him. And, in a small number of cases, that has meant that the payments to their CEO exceed their tax payment.

Big deal. The numbers aren't anything to do with each other. As our dear friend Sir David Tweedie might say, you may as well take the CEO's pay and divide it by the cube root of the number of miles to the moon and multiply it by your shoe size for all it has to do with the company's tax payment.

General Electric and Verizon were also among the companies that spent more on lobbying than taxes in 2010. Ivan Seidenberg, CEO of telecom giant Verizon, actually received a refund check from the US government for over $700 million, all while citing profits close to $12 billion. Mr. Seidenberg himself made $18 million last year.

Lobbying, taxes, nothing to do with each other... yeah, you get the picture. And those $12 billion of profits aren't, as the article insinuates, as a result of massive government favours following extensive lobbying, but they're profits which - because of the tax law - aren't subject to tax now, but will be in the future. [Verizon's tax situation is also complex because of Verizon Wireless, which is 55% owned by Verizon (and therefore consolidated) with the remainder owned by Vodafone. There are therefore profits in that business which belong to Verizon for accounting purposes when presented in their consolidated accounts but which don't belong to them for tax purposes] Indeed, as the article somewhat reluctantly admits:

Reps from both Boeing and Verizon responded to The New York Times that they expect to pay deferred taxes at some point in the future

Yet sadly that comment must have come in after IPS had penned their grubby little report.

 

People who read this post also read:

• Eoin and corporation tax paid by big companies
• Goldman Sachs and the timing of tax payments
• Ritchie and deferred tax
• Pasty tax vs corporation tax
• Ritchie wields the sledgehammer

Filed under: Current issues, Taxation with tags corporation tax, directors, idiots, institute for policy studies, sir david tweedie, verizon